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The best purchasing strategy for business energy depends on your company's size, energy usage patterns, budget, risk tolerance, and market conditions. However, here are the most effective and widely used strategies for managing business energy procurement:

1. Fixed Energy Contract
Description: Lock in a set price per unit of energy for a specific term (typically 1–5 years).
Best for: Small to medium-sized businesses with predictable usage.

Pros:Budget certainty.
Protection from market price spikes.
Cons:No benefit if market prices fall.
Penalties for early termination.

2. Flexible (or Pass-Through) Energy Purchasing
Description: Buy energy in tranches or let some costs fluctuate with the market.
Best for: Large businesses with dedicated energy management resources.

Pros:Ability to take advantage of price dips.
Customizable purchasing throughout the year.
Cons:Higher risk exposure.
Requires active market monitoring.

3. Blend and Extend Contracts
Description: Negotiate a new rate before the current contract ends, blending old and new prices to lower the average cost.
Best for: Businesses with slightly above-market rates wanting to reduce costs without waiting for the end of a contract.

Pros:Can reduce current costs.
Less risky than full renegotiation.
Cons:Extends the contract length.
May not be advantageous in falling markets.

4. Green Energy Purchasing
Description: Source energy from renewable providers (REGO-certified in the UK, for example).
Best for: Businesses with ESG goals or sustainability mandates

Pros:Boosts sustainability credentials.Often fixed-price like standard contracts.
Cons:Can be slightly more expensive (depending on the market).
Fewer suppliers.

5. Energy Basket Purchasing
Description: Pool energy purchases with other businesses to gain volume discounts.
Best for: SMEs that want economies of scale.

Pros:Lower prices through bulk buying.
Shared market risk.
Cons:Less control over contract terms.
Group must agree on purchasing timing.

6. Risk-Managed or Hedged Strategy
Description: Use financial instruments and hedging to smooth energy cost volatility.
Best for: Enterprises with in-house procurement or energy consultants

Pros:Protects against extreme volatility.
Often part of a flexible strategy.
Cons:Complex and requires expertise.
May involve upfront or recurring fees.